Cantor Fitzgerald to acquire Versant Partners

Summer has been tough on most local brokerage firms, big or small. Trading is down, and their aren’t too many growth capital financings to be had. But one firm has been quitely building their plan for the next half decade and beyond…our friends at Versant Partners. Cantor Fitzgerald is a New York sales and trading machine, but not as well known in research. Voila: Cantor Canada is born.

This deal will put Versant’s research coverage universe on the desks of many global money managers. While providing Versant’s corporate finance clients access to international road show meetings that traditional local boutique dealers can only dream of.

Versant is known to be strong in trading its core sectors, often out-trading the bank-owned dealers, and Research Head Tom Liston’s success in the technology space puts his firm perpetually at or near top of block trading in Catamaran (formerly SXC), Descartes (DSG:TSX), Absolute Technologies (ABT:TSX), etc. Tom has also been the top Starmine stock picker probably more than any other active Canadian software analyst.

SXC is a great example of the luxury of focus that boutiques can have: since Versant first initiated on SXC, the stock has gone from a $62 million market cap to one $9.1 BILLION market cap; and they’ve stayed in the flow somehow. Catamaran (as the company is now called) was recentlly named Fortune’s #1 fastest growing company, and is was originally a Canadian VC deal (see prior post “Covington does it again ” Sept 22-10).

As with the acquisitions of Orion and Westwind Partners, the hope is that the local folks like Mike Jams will be able to “leverage” Cantor’s existing 300+ sales and trading professionals. It can work.

Cantor must recognize that Canada is spinning out some excellent M&A candidates (Ruggedcom, Gennum, MKS, Miranda to name a few), and the chance to service the perennial demand for cross border IPO candidates will eventually return to the fore.

Yet many Canadian dealers have backed away from technology over the past three years. The allure of easy money in the resource market was just too compelling. But now, that’s biting back, and some of the small dealers that rely on sub $20 million equity deals are hurting. Don’t be surprised if one or two even close up shop.

But many tech names have worked out very well in the meantime: Catamaran (~ +270 in 3 years), CGI group (~ +130% in 3 years), Constellation (~ +180% in 3 years) and Descartes (~ +80% in 3 years) versus 11.24% for TSX over that same time frame; something investors will hear all about at Versant’s upcoming tech conference on September 27th — which has probably now morphed into Cantor’s Canadian launch party.

Congrats to everyone involved!

MRM